Do You Know the Rule? Ky. Employee vs. Independent Contractor

Frankfort, KY (WorkersCompensation.com) -- The tragic case of a taxi driver who was shot in the shoulder and paralyzed from the waist down caused the Kentucky Supreme Court to revisit its method of determining independent contractor status for workers’ compensation purposes.

A passenger hit the driver in Offafa v. Taxi LLC, No. 2022-SC-0003-WC (KY 02/16/23), while the passenger was holding a gun. The gun then went off, causing the driver permanent disability.

The company the driver worked for was in the business of leasing taxis to drivers. The company identified its drivers as independent contractors. The driver in this case even signed documents in which he agreed that, for the purposes of workers' compensation, he was not an employee. 

The company, opposing the driver’s bid for workers’ compensation benefits, claimed the driver was not its employee, but was merely an independent contractor.

The ALJ, in finding the driver was an independent contractor, considered such factors as the extent of control exercised by the alleged employer, as well as the intent of the parties. The appeals court, on the other hand, while reaching the same conclusion, focused on its finding that the driver never performed “work” for the company as that term is defined in KRS Chapter 342. The court of appeals also considered that the company’s bottom line was unaffected by how much or how little its drivers worked, given that its income came from the lease payments.

Rejecting the 10-factor test applied by the ALJ as well as the Court of Appeals’ focus on the definition of “work,” the state’s high court instead adopted the “economic realities” test. 

In adopting that test, the state Supreme Court stated that Kentucky courts must now consider the following factors in distinguishing an employee from an independent contractor:

• The permanency of the relationship between the parties;
• The degree of skill required for the rendering of the services;
• The worker's investment in equipment or materials for the task;
• The worker's opportunity for profit or loss, depending upon his skill;
• The degree of the alleged employer's right to control the manner in which the work is performed; and
• Whether the service rendered is an integral part of the alleged employer's business.

In applying the test, the court stated, the central issue is "the worker's economic dependence upon the business for which he is laboring,"

“For claimants such as [the taxi driver], who work within ever-complex business schemes, that dependence is an integral part of deciphering whether he was an employee,” the court wrote.

The court remanded the case back to the ALJ to apply the new test to the driver’s case.

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